Sunday, July 5, 2015

Time for Hollande to Step Up

It has been announced that President Hollande and Chancellor Merkel will meet in Paris tomorrow night. It is now time for Hollande to show what he's made of. There are already signs of a gap opening up between France and Germany. Although Wolfgang Schaüble said before the vote that there would be no immediate resumption of talks no matter which way the outcome went, both Finance Minister Michel Sapin and Economy Minister Emmanuel Macron called for a resumption of talks and no punitive measures.

If I were to hazard a guess, I would say that there will be no immediate cutoff of the ECB's Emergency Liquidity Assistance and perhaps even an increase in the daily ceiling. This will allow Greek banks to reopen, alleviating pent-up pressures and preventing a massive outburst of Greek anger and recourse to the streets. There will then be time for both sides to work out a strategy.

In my view, if there is an ounce of humanity and a modicum of rationality on the Troika's side, they must agree to talks about debt reduction now that Greece has voted a resounding No and the IMF has admitted that the debt is unsustainable. Anything else would be heartless, vindictive, and likely to fail. If this happens, Syriza will have won a tremendous victory, which I freely admit I did not think possible.

If the Troika refuses debt reduction talks, I see nothing but trouble ahead. This is the opportunity, if ever there was one, for Hollande to press Germany hard, as he should have done in 2012. It is a moment for statesmanship, and, if I may put it bluntly, time to grow some couilles.